Topic: . (Read 6760 times)

Sorry, but this is how markets work.  If you can't understand that, don't trade.  There is plenty of money to be made with a simple DCA strategy.

You can't have manipulation if you don't have greedy people who think they are smarter than they really are.

Someone who actually gets it! With a name like Technomage, you might expect that. I used to worry about the combination of cheap nuclear energy (but after Fukushima, not so much) and transmutation. But asteroid mining seems closer, especially with the forward looking D.D. Harriman, I mean P. Diamandis, not to mention E. Musk.

Gold will become an industrial metal, and one much less useful than silver. It’s just matter of timing. Therefore, the rise of Bitcoin, or its successor, is also unavoidable. Unless we somehow (NTDL) discover AND monetize stable trans-uranium elements...

The inflation is zero if you consider that there are 21 Million Bitcoins out there. A large portion are not owned by anyone yet however.

My feeling is that market participants are not overly concerned with the fine details of the bitcoin rate of inflation. In fact I suspect some of them would be surprised to learn just how high it presently is (~ 13% p.a.). The (correct) broad perception that the rate is falling, will continue to fall to near zero levels within the medium term and that the ultimate supply is fixed, is more important. But I think most important of all is the assumptions that are made regarding the rate of adoption of BTC in the wider economy, since ultimately that is the fundamental driver.

Excellent point. Related one: if you're a wealthy individual/hedge fund/any entity with substantial amounts of money, being generally of the opinion that bitcoin has some chance of success and therefore planning to make an investment, would you (a) take some very high risk  gamble, possibly risking your entire investment, or would you (b) try to buy in at an early point at a comparably low price, while keeping slippage as low as possible.

I'm not saying there are no speculators of the first category, that try to execute some high risk/high reward manipulation schemes, but the more paranoid in here seem to believe that everyone with a lot of money entering bitcoin is on a mission to manipulate the market, and initiate wild price swings, when in reality, most of those will probably simply try to buy in as cheap as possible, and then wait.

Agree. For some time, there will be players who can move the market. But differently from the bank led markets, the players will have take risk into account. The banks play high with others's money, and their risk is socialized.

If you had bitcoins equivalent to a million or two, would you risk it all in a pump/dump or a dump/pump scheme?

http://www.youtube.com/watch?v=mEnUhjmwjlI

Are you sleeping well while the train leaves the station?

ROFLMAO ... thankyou for the confirmation
Nice to see that senior members are fully in favour of milking new entrants for every last drop.
'Oh, it was market forces' ... LOL ... no, it was bullshit manipualtion on NO VOLUME

Sleep well ...

Market forces will ensure that those who trade are exposed to appropriate risk.

If you really don't see it, you are blind ... see an optician
'
EDIT : The 'wealthy entities' ARE the market forces right now ... there is fuck all else going on ... so they play their games ...

If you have paranoid delusions of powerful entities controlling price against market forces, see a therapist.

You're excused 

If you find you have a conscience , listen to it

Phew, that solves all of my dilemmas .... I'm all in to this manipulated price, RIGHT NOW 

It would be nice to be able to have more trust in the big BTC stakeholders than in governrnents and central banks. At the moment iI trust neither ...

Thought provoking thread.  Thanks for sharing chodpaba.  Is there a solution to this volatility "problem", or will it forever be a crutch, of sorts (even if we imagine a perfect world where everyone is using bitcoin for everything)?  

Economic n00b here.  Please be nice.  

That part I get, it's the inelasticity of supply of either bitcoin or litecoin (but particularly bitcoin) that I'm curious about.

Please explain to me what I'm missing:

Most people, myself included, are hoarding coins unwilling to sell, so the supply is really only a small fraction of the coins in existence in the world at current prices. With that said, if the price climbs substantially, the supply of coins that people are willing to sell will grow; I certainly have a couple of coins sitting around waiting for the $200 price point.

So are you claiming that new coins come into the market at a rate of the log of the price, and thus the supply grows much slower rate than the price? Or are you assuming that the supply is relatively fixed because of the controlled release schedule of mining? If it's the latter, I think you're very wrong.

Well we have approached the 0.0183 LTC/BTC as predicted by chodpapa the oracle.

This was an interesting speculative post thanks for posting 

Don't know why it took me so long to notice this thread, I like your analysis and meticulous methods, chodpaba.

I'm just going to put this here before the next wave up happens. (No, I don't know the timing, just saying it will happen eventually...)

If you take the prior traded extreme to the next traded extreme, the high of 31 to 266 was approximately ~758%.

If you use this as a general guide (and it could be utterly wrong in terms of magnitude - as in, not high enough) projection would say from 266 to our next theoretical oh-no-that-is-impossible-high would equal: 2,283

Crazy? Perhaps not. Our original rise from the first 'tick' of when bitcoin traded was ~3,000%+ to the 31 high. Maybe I'll come back later and find out that even extrapolating that lofty number wasn't enough. Or, as some cynics believe, it will be worth zero - but I highly doubt it.

I'm willing to believe that, but the statistics I have access to say otherwise.

I will agree that in terms of goods being produced we are currently experiencing deflation, but the inflation rate of the CB currencies outstrips it as far as I can see.
 

By 'We' you mean Bitcoin right?

Maybe.

I know what you mean, but you said it so subtly I felt that it needed a quote.

Edit: found something else.


In relation to this, how do you take account of lost Bitcoins? (I assume that you can't, which is fair.)

The only upgrade it really needs is Zerocoin.

+1

i don't even know why we're having this discussion, seeing as bitcoin isn't parallel to litecoin, the reason being that supply of these coins will not be what determines the price ratio.

The worth of a coin depends on what you can do with it. Bitcoin is worth $98.9 (or $92) because of the economy underlying bitcoin. The litecoin economy is less comparable. How i see it is that people will likely fork towards the best economy because it makes sense. Why would you choose a smaller economy over a larger one? and as such, bitcoin wlll grow and grow, at a rate much faster than ltc.

Yes Really, you've written an equation describing the relationship between Litecoin and Bitcoin and can't show how you derived it. Makes you look un-credible and I'm calling shenanigans on you!!

You are doing a great job providing blinders to folks.

Thanks for the link how did you work out that equation?

Just to clarify can you confirm if e is the speed of light or not in your formula?

LTC is hardly illiquid, if you define liquidity as ability to convert to USD then LTC is no different from BTC.  If you define it as being able to spend it directly with online merchants it's certainly behind BTC but not by the absurd orders of magnitude that your claiming.  It is also IN NO WAY FIXED and it is not at all clear how its going to change in the future.

Also your mistaken to think that usage is actually what supports the price of ANY of these coins, their values are still massively speculative and the actual commerce volumes can't support prices when all goods are de-factor priced in dollars.

And they can always pull those changes even if they haven't written them, that's basically what every alt-coin dose when its created, copying is always easier then originating.  And frankly BTC developers are being far more conservative in what they will do and what idea spaces they will explore then are alt-coin developers, Sunny King is an example of someone doing stuff that would never done by BTC.

Ok so your admitting you were confusing inflation rates with nominal supply numbers.  This is a really naive mistake to make, after all "1" BTC is a completely arbitrary unit and it's only relevance is to how many units exist or will exist and what the valuation of the total market cap is.  People have been spinning off all kinds of alt-coins with crazy high or crazy low nominal unit counts and people have recognized for ages now that all that matters is valuation of total market cap, inflation rates relative to ultimate max coin base and the rate that you can acquire a portion of that market cap.

Also I see nothing that justifies 1/(e^4) as a formula for the value of 1 LTC relative to a BTC and I think your either trying to Bullshit people with fancy numbers or you have grossly misapplied a formula you found somewhere.  LTC and BTC are separate goods, though their may be a substitution effect in which the broader consumer need for 'crypto-currency' can be satisfied by one or the other, presumably with BTC as the superior good because of it's wider usage.  But ultimately demand will be the determining factor with the coin buyer choosing between an ASIC network and a GPU network which is the main factor differentiating them.  I can't say what people are going to prefer but it sure can't be expressed as an equation like that.

What does that distribution curve look like and how many BTC are at the top? Why is it easy to read the minds of the larger population?

This thread has been an enjoyable read.
I agree with chodpaba that people think linearly and not exponentially, Bitcoin was exciting to start as I saw the opportunity for exponential growth but when I witnessed it in the market in 2011 and the beginning of the 2013 it was hard to comprehend.

It also stands to reason that the halving of Bitcoin's rate of inflation, is known and as such most investors tend to have their coins.  It is only the new investors now who don't yet have coins and creates an opportunity for growth via the "elastic demand".

 As Bitcoin has an almost inelastic supply, and as / if demand increases, we should expect exponential growth in price.  I am left with the following thoughts;  As the price increases, demand tends to wane, as "new" early adopters tend to move on to new things to avoid being laggards, (hence the interest in LC or alts)

So the supply dose becomes somewhat elastic relative to demand by adjusting as old coins go into circulation and this should happen with every magnitude of growth, if it doesn't, the price will stagnate and tend to fall to its utilitarian value, and then grow organically based on the demand and flow of money.

So I understand exponential growth is possible, and have seen it in action, I see the elasticity of demand adjusting radically to the point it actually discourages adoption, so as I don't understand how you model that mathematically, I don't think it can be predicted.

It's like; because the supply is finite, the supply has to be constantly distributed as demand increases, if it isn't then the supply finds a balance based on the excising demand.  (ie wealth extraction has to take place as Bitcoin is adopted, but if it takes place too rapidly it self corrects)

But the similarity ends on the demand side, demand is no where near as constant as in real assets like cotton.

A better comparison would be Rhodium which even has volatility of a similar magnitude to Bitcoins.


The supply side has even more inelastic properties than cotton since it's production is tied as a byproduct of other metals. But the demand side doesn't have the inelastic properties you suggest, I would even say it is highly elastic, like Bitcoins speculation driven by a large extent.

I would argue that elasticity doesn't really apply to Bitcoin because it implies demand based upon inherent value. But Bitcoins have no inherent value, just the network provides utility which is something else.
In other words demand and liquidity are dependent on positive feedback since the utility comes out of distribution which in turn follows the market price.

I've probably missed where you justified this. Could you point me to it?

That rate of inflation is CONSTANTLY CHANGING for BOTH COINS.  It's just a matter of how far down the mining curve it is.  LTC started Oct 2011 making it 22 months old.  It has the same inflation rate as BTC had 22 months after it's launch.  Any side by side comparison will always show that LTC has a higher inflation rate then BTC but that ratio is just coincidentally around 4 right now, it has nothing to do with the 4 times greater nominal block rates.

The day LTC started it had a million times the inflation rate as BTC had on that day back in 2011, as time goes on the rates for both coins will decline and the gap both in absolute and relative terms will decline.  Years from now BTC will be growing at 1% a year and LTC at 1.1% an insignificant difference.  chodpaba has ignorantly concluded (or at least implied) that LTC ALWAYS has a 4x higher inflation rate, and any conclusion drawn from that is going to be flawed.  As for what a fair valuation for LTC is I have no comment but at least get your basic terminology right before you post your speculations.

someone should come up with a cryptocurrency inflation index, which combines market cap + block rewards of all known cryptocurriencies.

Interesting thoughts. I agree that as a speculative scarce asset bitcoins will always fluctuate in value, but in time the growth phase will be over and it will settle in a place where the value is not driven purely by speculation anymore. How long this will take, that I don't know. I'd say that if Bitcoin is still up and running and useful, this will happen during the next decade. This decade is all about the growth phase, which might reach its peak around 2020.

When the intensive growth phase is over and we reach a sort of semi long term top (if we still have inflating paper monies at the time, we would eventually go over that top too in relation to those paper monies) and make a correction down, which is when the volatility of Bitcoin starts to go down in general. Bitcoin would be more like gold but gold on steroids (as it's actually useful and convenient as a medium of exchange).

Obviously this is all thin ice speculation since we simply don't know if anyone uses Bitcoin in 2020 anymore. But as long as there isn't a clear cryptocurrency replacement for Bitcoin, or a reason for one, I see no reason to assume that people wouldn't use Bitcoin in 2020. What I do know is that cryptocurrencies will be there, and they will play a larger and larger role in world economies, that is pretty much guaranteed.

Later this century we will see gold & silver largely devalued as asteroid mining comes into play (trust me, sooner or later it is coming) which will be the time when cryptocurrencies are actually the only scarce monetary assets in existence, which will put them in a very respected position. That is the final seal that guarantees cryptocurrency domination.

Just wondering do you trade Litecoins?

35, FWIW. With any kind of luck they have 40 good years left, and maybe 20 less good after that.

"Inflation rate" is relative to the number of coins in existence. You said it yourself: growth in monetary base.

LTC's current inflation rate is over 5x that of BTC. See here: https://bitcointalksearch.org/topic/inflation-rate-coin-supply-growth-of-major-alt-coins-updated-2013-06-26-227395 .

That's not true.

Yes moron cause "inflation" (actually growth in monetary base) is relative to the number of coins already created and which will ever be created.  At the end of 4 years BTC was at half of all coins and when LTC hits it's first halving event in a few years or so it will be at half of all LTC.  Thus each chain produces 12.5% of all coins per year the first 4 years, the same inflation rate.  The only difference is LTC chain was started later and is still in an earlier part of the curve.

Same coins per block, blocks mined 4x faster.

Same inflation rate? Really??

Wait a sec, LTC has exactly the same inflation rate as BTC as its just a strait copy-paste of the BTC mining scheduled but at 4 blocks in a 10 minute period rather then one.  It has the same coins per block and the same 4 year period between the rewards being halved as BTC, it's just started later in time so its still in the first leg of higher inflation equivalent to what BTC was doing back in around 2012.  So it is as good or as bad as the economics behind BTC.

If your looking for flawed economics look at the fact that both are designed to be deflationary and derive all their valuation from speculation, that's the real weakness.

Um, I can't really see altcoins as a Bitcoin substitute. Their valuation is a subset of Bitcoin they function merly as a Bitcoin derivative.

ETF approval

I wonder what the Winklevoss are waiting for.  How old are they?

now you took away the punchline everyone was set up for.
there is one drawback, though. eventually Bitcoin settles in its niche and something else continues to innovate. then it would converge to a non-zero stable value, maybe even driven by - fundamentals.

Can and must.

.